Explainer-What to expect as US moves towards faster stock settlement
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U.S. markets are set for an upheaval on Tuesday when the settlement time for U.S. equities, corporate municipal bonds and other securities will be halved to one day, or T+1, after the adoption of a new Securities and Exchange Commission rule in February 2023. The change is expected to reduce risk and improve efficiency in the markets, as investors will get their money and securities sooner. Market participants, such as banks, custodians, asset managers, and regulators, have been working to ensure a smooth transition. The U.S. is not the first country to move to T+1 settlement, as India, China, Canada, Mexico, and Argentina have already made the shift. Britain's stock markets plan to shift to T+1 by the end of 2027, and the European Union is also considering the move. However, there are challenges and potential risks associated with faster settlements, including the need for financial firms to adjust their processes and the possibility of a temporary increase in trade fails.

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